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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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The property is in California. The seller is foreign. The

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The property is in California. The seller is foreign. The property is being sold at a loss. It is my understanding that the Federal FIRPTA (10%) and California FIRPTA (3 1/3%) will be withheld through escrow. I do not know yet if the seller has an ITIN.

The question is, 1) How difficult is it to file for a refund? 2) Is it likely that a refund will be made?

LEV :

Hi and welcome to Just Answer!
Federal and California FIRPTA withholding is based on the sale price to cover possible tax liability on possible gain with assumption that there will be a taxable gain.
Nevertheless - there are some exemptions from FIRPTA withholding - in particular - when the property is sold
If the property is sold at a loss for federal and California income tax purposes - if sold by the individual and if the seller agrees - FIRPTA withholding may be avoided.
You may find some details and explanation in this publication - http://www.joannegardiner.com/FIRPTALawinCalifornia.html

1) How difficult is it to file for a refund?
Assuming the seller is a nonresident alien - the tax return should be filed on form 1040NR
The tax return may be self-prepared or any tax preparation service could be used. Assuming - there will be only ONE reportable transaction - that should not be too difficult - but if you do not feel comfortable - it might be better to use any tax preparation service.
Please see instructions - page 53 - http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
As we see - the IRS estimated .an average preparation time 10 hours and average cost $150.
ITIN would be required - and may be requested from the IRS - see here - http://www.irs.gov/Individuals/Individual-Taxpayer-Identification-Number-(ITIN)

2) Is it likely that a refund will be made?
If there is no tax liability - and the tax return is timely filed - the refund will be issues. 100%. That should not be an issue.

LEV :

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